UNDERCHARGE UPDATE

Reproduced with the Permission of Miles L. Kavaller

Willig Freight Lines is in Chapter 11 bankruptcy pending in the United States Bankruptcy Court for the Northern District of California and is the latest carrier to enter the undercharge fray. Apparently high pressure collection tactics are being employed even to the extent of threatening to report adverse credit information to Dun & Bradstreet. But even if the undercharge claims were well founded, which they are not, such tactics are probably unlawful. Moreover, enforcement of intrastate motor common carrier tariff rates and rules has been preempted by federal law which is now contained in the ICC Termination Act, 49 U.S. C. 14501 (C)(1). In fact, in the Industrial freight System bankruptcy U.S. Bankruptcy Judge Ernest Robles ruled on January 29, 1996 that under this statute intrastate motor common carrier tariff charges could not be collected by the Trustee. That ruling is currently on appeal to the United States District Court for the Central District of California.

Because federal preemption prohibits enforcement of CPUC filed motor common carrier tariff rates, the CPUC proceeding in the Industrial Freight System litigation has been terminated. It will be reinstated only if the U.S. District Court overrules the decision of the bankruptcy court, a result which I believe is unlikely. As for the trustee's claims for interstate motor common carrier tariff based charges the Negotiated Rates Act of 1993 and the newly enacted ICC Termination Act provide numerous defenses for shippers. The most notable defense is the small business concern exemption. As small business concern is deemed by regulations issued by the Small Business Administration and is based generally on either a company's revenues or number of employees depending on the nature of the company's business. Of the clients that I represent many qualify as small businesses and will be exempt from the payment of undercharges for interstate shipments.

Superior Fast Freight is also in a Chapter 11 bankruptcy which has coincidentally also been assigned to bankruptcy Judge Ernest Robles. He has temporarily stayed judicial proceedings in the bankruptcy court and will decide whether he or the Surface Transportation Board will determine if Superior Fast Freight operated as a freight forwarder exempt from tariff filing requirements or was a motor common carrier. Motions are also expected to be filed asking the bankruptcy court to require Superior Fast Freight to escrow all undercharges previously collected and to prohibit the collection of any further undercharges until a decision has been made on this question.

The Superior Fast Freight proceeding also includes the bankruptcy of Gentry Services, Inc. dba, Super-Cal Express which performed intrastate motor common carrier transportation. Undercharge claims for intrastate shipments have been made in adversary proceedings filed in the bankruptcy court. Shippers have filed motions to dismiss the intrastate undercharge claims and expect a favorable ruling at a hearing now scheduled for June 18, 1996 in view of Judge Robles' earlier ruling in the Industrial Freight System litigation.